When two parties sign a contract for the provision of services and/or products, it is always a good idea to consider how a difficult dispute that may arise between them will be resolved.
For reasons of time, money and finality, arbitration is a good choice. However, unless the arbitration clause in the contract is specific about the applicable rules and other administrative aspects, the resolution might be as cumbersome and expensive as litigation. Thus, it is very important to employ a well-constructed arbitration clause.
Shown below is one that many companies use:
"Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof."
The rules do allow for some flexibility in adapting the rules to specific situations, yet do set limits on the kind of litigation practices that can result in lengthy, expensive resolution.
While this clause calls for administration of the dispute resolution by the AAA, it can also be administered by the arbitrator(s).